Mitsubishi UFG Comments on G10 Currencies

06:54 AM EDT, 09/25/2025 (MT Newswires) -- Wednesday's softer German Ifo survey hasn't materially altered expectations for the European Central Bank to leave rates on hold through the rest of this year, said MUFG.

ECB Executive Board member Piero Cipollone spoke on Wednesday and expressed confidence that the ECB is on track to meet its inflation goal. Cipollone stated "We think that the risks to inflation are very balanced. We are in a good place. I mean, we are right on target. We will be close to our target for the next two years."

With the ECB set to leave rates on hold through the rest of this year while the Federal Reserve plans to deliver two more 25bps rate cuts, the bank continues to believe that the near-term policy divergence will encourage a stronger euro (EUR) and lift EUR/USD up towards the 1.2000 level by year end.

The rebound for the US dollar (USD) since last week's FOMC meeting has been broad-based, wrote the bank in a note to clients. The New Zealand dollar (NZD) has weakened the most (-2.8%) against the US dollar since Sept. 16 followed by the Scandinavian currencies of the Swedish krona (SEK), down-1.9%; and Norwegian krone (NOK), 1.8% lower, and the yen (JPY), 1.6% weaker.

The yen has weakened even as the Japanese rate market has brought forward expectations for the next Bank of Japan rate hike after last week's BoJ policy update, stated MUFG. There are currently around 14bps of BoJ rate hikes priced in by the end of the October policy meeting and 20bps of hikes by the end of this year.

It follows two dissents from BoJ members at last week's meeting in favor of resuming rate hikes. The release overnight Wednesday of minutes from the BoJ's previous policy meeting in late July, while dated, supported building expectations for a rate hike.

The minutes revealed one member thought it may be possible to end the BoJ's wait-and-see mode by the end of this year. One member thought it would take at least two to three months to examine the impact of U.S. tariffs. One member thought it was important for the BoJ to raise rates in a timely manner.

Heightened political uncertainty in Japan could be preventing the yen (JPY) from strengthening on the back of BoJ rate hike expectations, added the bank.

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